Since the start of the year, the stock market has been in utter disarray. Amid multiple macro-economic headwinds, investors have rotated out of risky growth stocks to ones that carry significantly less risk or simply to cash. Consequently, many long-term stocks with explosive upsides are trading at a substantial discount.
Growth investors have enjoyed a golden decade of returns. A JP Morgan report last year showed that global growth stocks outpaced value stocks by 146% over the last 10 years. The outperformance accelerated tremendously during the pandemic years, as changes in consumer behaviors benefitted tech, media and online retail businesses.
With growth stocks trading at multi-year lows, it would be prudent to now add a few which offer massive upside potential over the long-term. Seven of the most promising ones are discussed below:
|U||Unity Software Inc.||$34.35|
|AMD||Advanced Micro Devices, Inc.||$86.99|
Quantumscape (NYSE:QS) is a leading developer of solid-state batteries. These batteries are expected to have significantly higher energy density and lower recharge times than lithium-ion batteries. Additionally, its cells don’t have an anode, making them far more cost-effective than current batteries.
During the first quarter, the company reported positively on its tests for 10-layer cells in use by one of its electric vehicle-maker customers. It will deliver these initial sample cells to multiple customers this year.
It recently released results for its 16-layer cells, which again ticked all the right boxes. QuantumScape believes it continues to increase layers without impacting a cell’s performance. Moreover, having partnered with some of the top automakers, it has the impetus to push past the finish line and achieve the holy grail of EV batteries.
Wagering giant DraftKings Inc. (NASDAQ:DKNG) has established itself as a growth juggernaut in sports betting. The market for legal sports betting continues to blossom, having doubled in size last year, with Americans betting more than $52.7 billion. That number is expected to grow by double-digits over the next few years, and DraftKings and its peers will reap the benefits.
The company recently reported its Q1 results, where revenues surged 34% to $417 million. The massive increase was led by 44% in its B2C segment. Moreover, unique monthly payers and average revenue per user grew 29% and 11%, respectively, with strong customer engagement.
DraftKings anticipates revenues to be in the $1.93 billion to $2.03 billion range, a significant step-up from its prior view of $1.85 billion to $2 billion. If it continues on this trajectory, it won’t be long before it breaks even.
Block, Inc. (NYSE:SQ) is a fintech disruptor that has been growing at a staggering pace. Its revenues have grown roughly 64% on average over the past five years. It’s still expanding its revenue pace at a healthy pace and is marching towards profitability.
Cash App, Block’s consumer personal finance tool, has been a hugely popular service and continues to drive growth for the company. At the end of last year, it had an impressive 44 million monthly active users.
Moreover, it acquired buy now, pay later giant Afterpay, which should substantially improve the company’s network infrastructure. The service brings in over 1 million leads every day for its merchants. The improvements and additions have contributed to the stickiness of the ecosystem, with Block benefitting immensely from network and switching effects.
SunPower Corporation (NASDAQ:SPWR) provides solar products and services to residential, utility-scale, and commercial customers. Its high-performance solar electric systems have become hugely popular over the years and continue to gain customers rapidly each quarter.
The company added 16,500 customers in the first quarter, up 40% on a year-over-year basis. Moreover, there’s a record backlog of 13,800 bookings, up 169% from the prior-year period. Also, its gross margins came in at a tremendous 20.6%.
Sunpower affirmed its previous guidance for the fiscal year 2022 at a remarkable $90 million to $110 million adjusted EBITDA.
Additionally, the U.S. ban on importing Russian oil is a major catalyst for SunPower. Likewise, The Biden Administration declared a 24-month exemption from tariffs on solar panels. Therefore, with multiple tailwinds behind it, SPWR has an incredible growth runway ahead.
Unity Software (U)
Unity Software Inc. (NYSE:U) is a leading game engine that boasts a user base of over 2.8 billion. The tech giant has posted above-average revenue for growth for the past several years, with a strong increase in cash flows. Its addressable market for gaming exceeds 4 billion active users, and Unity serves over 50% of game developers.
Though it’s been a mainstay in the gaming space, its non-gaming businesses are growing faster, generating 70% growth in its most recent quarter.
Real-time 3D and the Metaverse are two sectors that hold the most promise, with 34 deals closed out in just the last quarter. Moreover, first-quarter sales rose 36% on a year-over-year basis to $320.1 million, with a net expansion rate of 135%. Therefore, with multiple use-cases, it is likely to continue on its upward trajectory for the foreseeable future.
Microsoft Corporation (NASDAQ:MSFT) has established itself as an icon of the software and cloud space. Its software-as-a-service arsenal is unmatched, with a rock-solid cloud business in Azure, coupled with ambitions in gaming and the metaverse.
It is a leading communications-as-a-service platform in automation and Teams. Perhaps the cherry on top is its formidable cyber security business.
Microsoft’s role in the software industry is pivotal and has made the company one of the behemoths in the tech world. Azure has been a fast-growing business offering over 200 products and services. The service alone has helped propel MSFT stock’s valuation to over $1.5 trillion.
Additionally, it has a fortress of a balance sheet, with a whopping cash balance of $104.7 billion which dwarfs its debt burden. It also offers a growing dividend, with a payout ratio of roughly 26.50%.
Advanced Micro Devices (AMD)
Semiconductor giant Advanced Micro Devices, Inc. (NASDAQ:AMD) specializes in the production of high-performance tech and computing products. With its wide reach across several lucrative computing segments, there’s a lot to like about the business.
Its total addressable markets in an aggregate are worth over $135 billion. Moreover, the business has been growing at a breathtaking pace, with its five-year average sales growth at roughly 32%.
AMD’s recent product offerings and acquisitions have helped generate substantial cash flows in the past three years. For instance, it made a negative $142 million in free cash flows in 2018, which jumped to $3.14 billion last year.
Additionally, it wrapped up its latest quarter with record revenues of $5.9 million, representing a 71% improvement from the same period last year. Consequently, it has used its growing cash flows to embark on repurchase activities which totaled $1.8 billion last year.